Apple's Big Fine

The EU delivers a big fine to Apple.
Apple's Big Fine

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Today's read: 6 minutes

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Apple gets hit by €500mn fine. Plus why Chinese companies are moving to Mexico.

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Today's story

Apple is set to be fined nearly €500 million by the European Union for stifling competition. This marks its first-ever penalty from the bloc for limiting music-streaming rivals like Spotify on its platforms.

What’s going on?

Apple's in hot water with the European Union, and the heat's about to cost them a cool half a billion euros. The tech titan, known for its sleek devices and the uber-popular App Store, is under fire for playing gatekeeper a little too strictly.

The EU's beef with Apple? The company's alleged elbowing out of music-streaming competitors by keeping them from telling users about cheaper deals outside the App Store's walls. The EU thinks this is a breach of its competition rules.

Apple last month announced changes to its iOS mobile software, App Store and Safari browser to calm down the EU. They now state that the app store has been key been a key player in Spotify's rise to the top in Europe, but the EU's competition chief, Margrethe Vestager, isn't buying it. She's been on a mission to curtail Big Tech's dominance, and this fine is her latest move in the chess game.

Why does it matter?

This is a glimpse into the future of tech regulation in Europe. The EU is laying down the law with its new Digital Markets Act (DMA), set to kick in soon. The act aims to prevent large tech giants like Apple, Amazon and Google (identified as gatekeepers) from hogging the market and squashing smaller competitors before they even get a chance to bloom.

For Apple, this fine is a wake-up call. The company has faced fines before (like the €372mn fine for anti-competitive behaviour in France), but this one shows the EU is very serious about protecting competition. There might be more to come as Apple is also facing a separate antitrust case over blocking financial groups from its Apple Pay mobile system.

How does this impact Law Firms?

Competition and Antitrust Law:

  • Regulatory Compliance and Defence: Lawyers specialising in competition law will be in high demand to advise tech companies, especially those with digital marketplaces similar to Apple's App Store, on how to navigate and comply with the EU's competition rules, and the DMA. They will be tasked with conducting compliance audits, ensuring that their client's business practices, such as pricing strategies and terms of service, do not infringe on antitrust laws. This is crucial for clients wishing to avoid hefty fines and legal battles similar to Apple's.
  • Litigation and Appeals: Antitrust lawyers will likely represent clients in litigation arising from alleged anti-competitive practices. They would also be involved in appealing against regulatory decisions, such as fines imposed by the EU. This involves not only defending clients in court but also challenging the interpretations of competition law, potentially leading to precedent-setting cases that could redefine how digital marketplaces operate.

Contracts and IP Law:

  • Licensing Agreements and Negotiations: Lawyers in the IP sector will find their expertise sought after for drafting and negotiating complex licensing agreements, especially where technology and software are involved. This is particularly relevant for music streaming services and app developers looking to operate within or enter the European market, ensuring they have the necessary permissions without falling foul of restrictive practices like those Apple is accused of.
  • Review and Revision of Terms of Service: Commercial contracts lawyers will also be heavily involved in reviewing and revising terms of service and end-user license agreements for digital platforms and services. They will ensure that these contracts are transparent, fair, and do not contain any provisions that could be construed as anti-competitive or in violation of the Digital Markets Act. This task is particularly important for clients operating in the EU, where regulatory compliance is paramount to avoid the risk of substantial fines and legal challenges.

Data Protection and Privacy Law:

  • Compliance with Digital Markets Act (DMA): With the impending enforcement of the DMA, lawyers specialising in data protection and privacy will be essential in guiding clients through the new regulatory landscape. They will help tech firms, especially those deemed as "gatekeepers" under the DMA, in implementing data handling and processing practices that comply with the new rules, ensuring user data is not used unlawfully to stifle competition.
  • Data Breach Response and Litigation: These lawyers will also play a critical role in advising companies on how to respond to data breaches, a task that will become even more complex under the DMA's stringent requirements. They will assist in the legal ramifications of breaches, including representing companies in investigations by data protection authorities and litigation brought by affected individuals or entities, ensuring that their clients minimise legal exposure and penalties.

One thing that caught my eye

Chinese auto-part manufacturers are setting up in Mexico to supply companies like Tesla, leveraging a loophole in US trade policy to cater to the American market.

What is this about?

A new trend is emerging where Chinese auto-parts giants are migrating south of the US border, finding a new home in Mexico. This move is not just about geographical relocation but a strategic chess play in the global automotive industry, aimed at powering the production lines of giants like Tesla.

Mexico has become a hotspot for these manufacturers due to its proximity to the US market. Chinese-made auto parts exported from Mexico to the US have surged in value, reaching a whopping $1.1 billion in 2023. This 15% jump from the previous year signifies a growing trend that's hard to ignore.

The plot thickens with Elon Musk's involvement. The Tesla CEO has extended an invitation to Chinese suppliers, encouraging them to mirror their Shanghai gigafactory's local supply chain right in Mexico.

A Policy Loophole?

Here’s where it gets juicy. The US, in its bid to promote clean energy, offers a tasty tax credit of up to $7,500 for electric vehicles under the Inflation Reduction Act. However, there's a catch: these vehicles must minimize the use of materials from "foreign entities of concern" (read: China). But guess what? These Chinese companies in Mexico are finding creative ways to fit into this policy puzzle, potentially qualifying for the tax credit without directly sourcing from China.


Chart of the day

Asking prices for properties have increased for the second consecutive month throughout the UK, as indicated by Rightmove, signalling a recovery in the market. However, experts advise a cautious approach towards property valuations, given the continued high levels of mortgage rates.

Credit: Bloomberg

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